Incident: On October 29, 2024, the company released its 2024 three-quarter report. Net profit attributable to parent company owners for the first three quarters was 2.846 billion yuan, a year-on-year decrease of 49.52%; operating income was 33.093 billion yuan, a decrease of 18.68% year-on-year.

24Q3 performance declined month-on-month. 24Q3 achieved operating income of 11.523 billion yuan, a year-on-year decrease of 12.28%, a month-on-month increase of 4.58%, and net profit to mother of 0.88 billion yuan, a year-on-year decrease of 21.54% and a decrease of 13.42% month-on-month. 24Q3's gross sales margin was 33.29%, down 1.59 percentage points year on year and 0.78 percent month on month.

Expenses increased month-on-month during the 24Q3 period. The total expenses for the 24Q3 period were 1.663 billion yuan, a year-on-year decrease of 24.48% and a year-on-month increase of 15.44%. Among them, management expenses were 1.005 billion yuan, down 1,83% year on year, up 15.12% month on month, and sales expenses were 0.166 billion yuan, up 24.05% year on year, up 115.37% month on month.

Competing for prospecting rights in the Shanghai block is beneficial to the company's long-term development. According to the announcement, the company participated in an auction for coal and co-associated bauxite prospecting rights in the Xingxian block of Luliang City, Shanxi Province, listed online by the Shanxi Provincial Department of Natural Resources. The company won the coal and cogeneration bauxite prospecting rights for 24.705 billion yuan. The coal and co-associated bauxite prospecting rights in the Xingxian block of Luliang City, Shanxi Province, involve coal resource reserves of 952.775 million tons, bauxite resource reserves of 55.6123 million tons, and gallium ore resource reserves of 3431.28 tons. The main types of coal are 1/3 coking coal and gas coal, with a planned production capacity of 8 million tons/year. Referring to the price of tons of bauxite resources that Ningbo Kunye Trading Co., Ltd. won bauxite mining rights in the Xiazaolin block of Zhongyang County, Shanxi Province on October 24, it is estimated that the value of bauxite resources in the Xingxian block of coking coal in Shanxi is 13.813 billion yuan, then the value of coal resources is 10.892 billion yuan, and the price of tons of coal resources is 11.43 yuan. At the same time, the announcement shows that the north of the Xingxian block is adjacent to the company's Xiegou coal mine, with simple geological structure and good mining conditions. The company has accumulated rich mining experience. The development of Ida in Xingxian County can use the technical advantages of Xiegou coal mine to make full use of the washing capacity of the Xiegou coal preparation plant and the transportation capacity of special railway lines to increase the market share of the company's products and enhance the company's own competitive advantage.

The company continues to pay a high percentage of dividends, and the dividend investment value is high. Starting in 2021, the company began paying a high percentage of dividends. The company's cash dividend payment rates for 2021-2023 were 78.67%, 63.54%, and 67.07%, respectively.

Assuming a cash dividend ratio of 60%, the dividend rate is 4.36% (corresponding to the market value on October 29, 2024), based on our estimated net profit of 3.474 billion yuan in 2024, and the dividend ratio investment value is high.

Investment advice: We expect the company's net profit to be 3.474/3.593/3.885 billion yuan in 2024-2026, corresponding EPS of 0.61/0.63/0.68 yuan/share, respectively, and the PE corresponding to October 29, 2024 is 14/13/12 times, respectively. Maintain the “Recommended” rating, taking into account the company's endogenous extrinsic growth expectations and high cash dividend ratio.

Risk warning: Downstream demand recovery falls short of expectations; coal prices have declined sharply; Group asset injection falls short of expectations, and there is uncertainty about resource development.